Types of Business organizations

1. Mr. Wyatt Types of Business organizations

2. Sole Proprietorships It means only one entrepreneur • Earns all profits and debts • 70% of businesses in the U.S.

3. What does it take to be an entrepreneurial? • Ambition • Risk taker • You should answer YES to all of these questions • Are you responsible? • Are you energetic? • Are you organized? • Are you goal – oriented? • Do you know how to run a business?

4. Advantages of going solo • Ease of startup and end • You have to have a Authorization from the STATE (business license) • You must obtain a Site Permit if operating out of a different location • Must register a business name • Few regulations • Beware of zoning laws • Owner gets full profits…if any. • Full control

5. Disadvantages of going solo • Unlimited Personal Liability • You are LEGALLY OBLIGATED to pay ALL DEBTS that your business makes. • This means that if your business fails (and most do the first time) you may have to sell personal assets to cover the debts. • Limited access to resources • Lack of permanence • Usually can’t offer Fringe Benefits

6. Partnerships Two or more people own the business 9 % of the businesses in the U.S. Excellent if the owner is willing to share

7. Types of Partnerships • General Partnership • Limited Partnership • Limited liability Partnership

8. General Partnership It’s the most common type All partners share in the responsibilities and profits of the business

9. Limited Partnership Only one partner is a full partner – the rest only invest money • The good side of this is that if the business fails, the limited partners only lose the investment money they put in. • Also called silent partners

10. Limited Liability Partnerships Just like general partnerships except in certain situations the partners have only a limited personal liability. • Ex. If a partner loses business money investing, the other partners are not fully responsible for the one partner’s mistake.

11. Advantages to Partnerships Easy to start • Its smart to have an Article of Partnership • Few regulations Financial Impact – more than one person contributes assets to the business • Able to offer better fringe benefits to keep employees Shared Decision Making

12. Disadvantages to Partnerships Partners in some form still have unlimited liability There is more potential for conflict between partners Lack of Permanence

13. What is a Franchise It’s a partially independent business that pays fees to it’s parent company. The owner(s) of the franchise owner gains exclusive rights to sell a good or service in a certain area.

14. The parent company is called the franchiser • It develops their goods or services to be reliable The local owner is called a franchisee • they produce and sell the franchiser’s product with the aid of the franchiser

15. Advantages to a Franchise • The franchiser offers management training and support • Each franchisee is required to follow certain standardized rules to ensure quality • The parent company can afford to advertise nationally • Franchisers sometimes offer assistance in startup costs • Capital goods necessary for the business are purchased in bulk by the franchiser

16. Disadvantages of a Franchise • High franchising fees and royalties meaning to get into the business is very expensive • Very strict operating standards or face loss of the franchise • Limited purchasing ability • Limited product line availability

17. Enter the Corporation It’s a legal entity owned by individual stockholders each of whom has limited liability for the firms debts. • Stocks are certificates of ownership in a corporation The most complex of all businesses The corporation has a separate legal identity from the owners. For legal purposes it is a person. 20% of all businesses in the U.S. but generate nearly 60% of all income

18. Types of Corporations Closely Held Corporations Publicly Held Corporations

19. Advantages to Corporations • Limited Liability • Other types of ownership compared to the previous models • It has three avenues of raising money • It can make a profit • It can sell stocks • It can sell Bonds

20. Disadvantages • MUST get a Certificate of Incorporation • They are DOUBLE TAXED • Loss of control is easy • Far more regulated than other types of businesses

21. Versions of Corporations Vertical Corporations Horizontal Corporations Conglomerates Multinational

22. Cooperative Organizations Cooperative • They are voluntary and open • Members control the organization • Contributions and benefits are shared by members • They don’t pay taxes as long as they arrange things in a certain way. • 20% must of profits must be paid to members.

23. Co –Op Types Consumer Service Producer

24. Nonprofit Organizations Usually benefit the public Exempt from income tax but the organization must meet certain requirements. • Can’t issue stock • All activities of the group must be devoted to what the IRS states as qualifications They can provide support to a particular occupation or geographic area

25. Types of Nonprofit Organizations Professional Business Trade Labor Unions